Andy Penn says the NBN's HFC network works 'absolutely fine' for Foxtel and Telstra

Telstra CEO Andy Penn. Photo: Matt King/Getty Images)

Telstra chief executive Andy Penn has praised the NBN and chief executive Bill Morrow for “putting the customer experience ahead of the roll out schedule” in, but taken a dig at the broadband network’s multiple problems.

On Monday, the NBN finally responded to the high level of complaints about the reliability of Hybrid Coaxial-Fibre (HFC) broadband — delivered via the old Pay TV network — and announced an immediate, temporary halt to its roll out while the problems are addressed.

Anyone set to receive it now faces delays of between six and nine months before they’ll be connected to the NBN, with the delay potentially costing taxpayers between $420 to $790 million by the company’s own estimates, as well as having flow on impacts for Telstra, which is now set to miss out on hundreds of millions in payments from the NBN this financial year.

Speaking at the American Chamber of Commerce in Sydney on Tuesday, the Telstra boss said the customer experience was “fundamentally the most important thing” so he supported the NBN’s decision.

“There’s been some pain with the HFC technology that the NBN use,” Penn said.

“Can I say, to be clear, that is the same cable that currently provides internet services for Telstra’s customers and also for Foxtel pay TV services and for those services it is absolutely fine and is delivering a great experience.

“It’s in the process of the NBN taking it and making whatever technology changes they are making to it is where they are having some issues.”

The NBN plans to connect three million premises to broadband via HFC. It currently has around a third of that number ready to connect and 370,000 have switched on, but reliability has been a major issue.

NBN chief executive Bill Morrow said the frequency band used was part of the technical problems, but HFC was “an important part of NBN Co’s technology mix”.

But it has caused considerable heartache for the business, which paid $800 million for the former Optus HFC network in 2011, only to scrap it due to its poor condition. Instead the company has relied on Telstra/ Foxtel’s network. It’s also the technology earmarked for the highest revenue potential by the NBN.

Penn says he supports “Bill and the whole team” putting the customer experience first and Telstra is analysing the financial implications now.

“There’s no longer term change, just a matter of timing as when Telstra receives payments,” he said.

“We’re working through the timing and the impacts of the numbers at the moment”.

Telstra receives around $1,300 per HFC connection and the NBN had been rolling them out at a rate of around 80,000 a month as it pushed towards a 2020 deadline, so analysts are predicting a drop in revenue to the end of the financial year in excess of $100 million.

Telstra will make an announcement to the ASX on the issue in the coming days, but Penn would not be drawn on whether it will impact on the company’s dividend.

But he did take some pointed digs at the NBN and the frustrations it was causing customers, saying connection experience is taking longer than for existing services Telstra provide and NBN customers are experiencing more issues.

“The HFC is an example of just one of those dynamics,” he said, adding that most of the issues are outside the control of the retailers (RSPs).

After being rebuked by the ACCC over the way it was selling broadband speeds and offering refunds to customers, Penn said one of the problems his company faced in selling broadband services was that the NBN could not tell Telstra what speed was available until the actual connection occurred.

“The issue around speed is that fundamentally, it depends the underlying technology the NBN choose to use in your area. If you’re connected on fibre, if you’re connected on HFC, if you’re connected to copper, that technology will have a certain degree of capacity,” Penn said.

Penn said the NBN “cannot advise on what the actual speed is in your home until it’s connected” meaning retailers are offering plans based on the technology and then monitoring it to see if they comply with the ACCC’s requirements.

Telstra won’t offer speed boost to customers connected via copper, he said, because of the risk they won’t get the speeds promised.

And while 5G will appeal to customers seeking mobile broadband, and some will forsake a fixed line for mobile only, Penn doesn’t believe 5G will replace NBN because “ultimately the laws of physics apply”.

“If you were to carry the same amount of data on a mobile network at a national level that is currently carried on a fixed network via the NBN at a national level, there would have to be such a very, very significant investment in mobile network capacity to cope with that,” he said.

Penn said people have a tendency to confuse speed and capacity, comparing mobile to a freeway with a 100kmh speed limit, but having only one lane and a lot of traffic. 5G and mobile “will play a bigger role” and will have an impact on the NBN, but it won’t render it redundant.

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